Makhlouf has taken ‘major hit to reputation’, says employer on final day

Gabriel Makhlouf said in a statement: ‘I apologise that budget information was not kept secure.’ Photographer: Vivek Prakash/Bloomberg via Getty

On his final day running New Zealand’s treasury Gabriel Makhlouf found himself damaged but not dismissed, and with his career-crowning next move, governor of the Central Bank of Ireland, still open to him.

However, his record as a steady and reliable civil servant, and a respected advisor of government ministers, is somewhat tarnished. He has taken a “major hit [to his] personal and professional reputation,” said Peter Hughes, the New Zealand state services commissioner and Makhlouf’s employer. But Makhlouf’s “failure” was not a “sackable offence”.

The inquiry into Makhlouf’s conduct found he “acted unreasonably” in characterising as a “hack” the leak of sensitive budget data from his department’s computer systems. And it caps a political furore that erupted when that data was published by the opposition National party more than two days ahead of the official budget release last month.

Makhlouf alleged the data was lost through a “deliberate and systematic hack”, despite the fact that treasury had already adjusted its internal computer systems to prevent any further leak. This suggested staff had some idea of how the information was lost. It transpired that treasury had inadvertently uploaded the sensitive data to its own website. Department staff had also been advised by the government communications security bureau (GCSB) that no hack had taken place.

The investigation found that at this critical juncture, Makhlouf had failed to take the advice available to him, particularly from the GCSB, which would have averted the mischaracterisation.

Instead the situation worsened. On Makhlouf’s advice, the New Zealand minister for finance, Grant Robertson, issued a press release repeating the claim and called on National to stop publishing the potentially stolen budget details.

The allegation “smeared” the National party, its leader Simon Bridges insisted. And more, it was part of a cynical effort by the secretary of the treasury to “cover-up” his own mistake.

Battle lines

Makhlouf’s place was fixed in New Zealand’s political narrative long before this controversy.

His background includes work for the Organisation for Economic Co-operation and Development (OECD) and a stint as secretary to the former British Labour chancellor Gordon Brown.

When he began to develop “wellbeing measures” at treasury to help paint a broader picture of New Zealand’s living standards, it was no secret that then National prime minister John Key scoffed.

It was not until a change of government in 2017 that Makhlouf’s efforts to place a dollar value on facets of social well-being, from friendship to cultural identity, were welcomed.

Prime minister Jacinda Ardern and her finance minister touted the new measures as forward-thinking, and put them at the heart of the 2019 “Wellbeing Budget”.

Meanwhile, the author of the review published on Thursday, John Ombler, found Makhlouf acted in good faith, and in a politically neutral fashion. But the sniping continues.

Following its release, National’s finance spokesman Paul Goldsmith said Robertson was ultimately responsible for budget security, and the report’s criticisms of Makhlouf could equally apply to the New Zealand minister for finance.

Robertson welcomed the report and said it confirmed the government’s description of events.

Interpretations

In New Zealand, commentators were divided in their interpretations of Thursday’s report. Right-leaning Newstalk ZB host Heather du Plessis-Allan suggested the government had gotten off lightly, with Makhlouf taking the fall for the mistakes made around the budget leak.

Audrey Young, political editor for the New Zealand Herald, said the deficiency was Makhlouf’s: a failure of leadership and a failure to take responsibility.

Makhlouf did belatedly speak-up, though only in a written statement issued late in the day by treasury. “I apologise that budget information was not kept secure,” he said. He also sounded a somewhat defiant note. “The report confirms I acted in good faith and with political neutrality. It also confirms that I acted reasonably, other than in my descriptions of the incident. I am pleased that my honesty and integrity are not in question.”

Hughes’ comments were less definitive: “My expectations of public service chief executives when things go wrong are very clear and they all know this. When things go wrong they need to own it, fix it, learn from it, and I expect people to stand up and be accountable, and I am disappointed that Mr Makhlouf did not do that on this occasion.”